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By Howard Wheeldon, Senior Strategist at BGC Partners

25 Nov 11. BAE Systems is the perfect example of their being far too much rhetoric from government in support of defence equipment manufacturing and UK export but far too little real action! It isn’t only government either. Take comparisons made in the press today between Toyota which has just announced an additional £100m investment spend at its Burnaston, Derby plant and that of BAE Systems which came under fire yesterday in the House of Commons because it has been forced yet again to readjust its UK based manufacturing portfolio to better match future anticipated business from the UK government customer. Toyota deserves praise of course but I view the criticism of BAE Systems both in Parliament and elsewhere as being both unreasonable and unfair.

If we leave the benefit of currencies aside and excellence of modern plant location in Derbyshire and the great product the company makes and that domestic and export customers clearly want to a greater extent Toyota may also be said to be benefiting from greater awareness that the UK coalition Government is now prepared to provide genuine support to those prepared to invest in the UK. This has taken a long time coming but for automakers that politically when the going is good happen to also attract great PR and public interest plus also providing hundreds of thousands of jobs it is somewhat easier than for companies within the UK defence industrial base.

While Toyota has been enjoying considerable success from its European operations for BAE Systems faced as a direct result of the governments 2010 Strategic Defence and Security Review with large scale equipment and programme cancellations and cuts made all the worse by a government that has made no apology for saying it prefers to buy off-the-shelf defence equipment from foreign suppliers rather than to invest specifically in UK designed and built product for our armed forces it is hardly surprising that the company has now been forced to announce closures and job cuts within its UK operations.

Cutting jobs is merely cutting one’s coat according to the cloth available meaning ensuring that the company remains efficient and competitive. In doing so it is true that more manufacturing and engineering skills are lost but if the government is not prepared to follow the example of other large defence buying nations and first protect their own indigenous industries what else can a company like BAE Systems do? The future scenario is in fact far worse than this as potential foreign buyers of UK designed defence and other equipment will not buy unless that equipment has also been acquired by the home nation government. In other words, if the British government won’t buy from its own why should anyone else?

Britain has a fantastically good defence and aerospace equipment industry and last year defence exports alone were worth around £6bn to the UK economy. Literally thousands of jobs are involved across the nation both in direct and indirect form. And yet despite promises of support to the manufacturing export industries the government pays little more than lip service to defence exports. True, the Prime Minister has visited Turkey and India but he has yet to go out to Saudi Arabia which is the core customer for approximately one half of UK defence exports. Paying lip service to such an important industry as this and the benefit in terms of jobs and tax receipts that it brings into the economy will not do. The government should be supporting the defence export industry not only by committing to buy UK product but also by doing what it can to encourage new product investment.

For a Conservative MP to bemoan that due to lack of commitment from government BAE Systems is being forced to run down its operations at Brough and because of SDSR related programme cuts such as Harrier, Nimrod MRA4, taking fewer

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